Month: January 2018

Sequant Re & Premier Diversified Holdings

Sequant Re

Sequant Re sounded like a very compelling opportunity for Premier (PDH) shareholders. The company focused on the ILS (Insurance Linked Securities) market. By securitizing the financial burden of insurance ILS allows re-insurance to be easily distributed among many investors. Typically before ILS re-insurance was handled by a few specialty insurers. ILS also offer investors a product with low correlation to other assets such as bonds and equity.

Sequant aimed to underwrite re-insurance through ILS and provide easy access to ILS portfolios for investors. Guy Cloutier an insurance industry veteran started Sequant Re. He was formerly of American Safety Re. There is an interesting connection here because American Safety Re’s parent company American Safety was purchased by Fairfax Financial and Premier’s CEO Sanjeev Parsad has a long standing relationship with the folks at Fairfax. Fairfax eventually sold of the reinsurance business of the American Safety.

Sequant Re Liquidation

After three years the board of Sequant Re has decided to throw in the towel. Premier Diversified Holdings (PDH) owns almost 50% of Sequant’s equity and will be writing it down from 2.5M to zero.

According to Sanjeev’s message on the COBF board, Sequant failed to recruit any large institutional partners. That ultimately lead to stopping the bleeding and calling it quits. Given Guy Cloutier’s history in the re-insurance biz and the connection Sanjeev has at Fairfax it seems like finding a partner for a good idea would not be so hard. Or maybe the idea was not compelling enough? It will be an interesting story to hear if we ever do.

In this Artemis article Guy was quoted as saying that their partner backed out due to US tax implications.

“We spent a considerable amount of time and resources in discussions with a potential significant strategic partner. At the end of the day, they did not proceed due to their perceived US tax implications.”

Conclusion

This is a big blow to Premier. The loss is a massive amount of money for a business of their size. On the plus side they have stopped the bleeding and will not need to fund Sequant any longer. Insurance Linked Securities are continuing to experience growth. It is an interesting area of insurance and finance that I will continue to keep an eye on.